NEW YORK: Wall Street stocks ended slightly lower on Monday (May 1)( after JPMorgan Chase acquired the embattled First Republic Bank, as markets traded cautiously ahead of a Federal Reserve (Fed) decision.
After a choppy session, all three major indices finished in the red at the start of a news-jammed week that also includes Apple results and a report on April’s employment figures.
The Dow Jones Industrial Average fell 46.46 points, or 0.14%, to 34,051.70; the S&P 500 lost 1.61 points, or 0.04%, at 4,167.87; and the Nasdaq Composite dropped 13.99 points, or 0.11%, to 12,212.60.
The JPMorgan deal came after federal officials placed First Republic in receivership, resolving the last major problem bank from a recent spate of troubles.
Under the agreement, JPMorgan, the largest bank in the United States, will assume all of First Republic’s deposits, as well as “almost” all of its assets, according to a statement from the Federal Deposit Insurance Corporation.
“Hopefully this is sort of the last of the banking crisis, but something else might surface at some point,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder here.
The KBW regional banking index dropped 2.7%, while shares of JPMorgan Chase & Co, which won the auction of failed lender First Republic, rose 2.1%.
“Wall Street is breathing a sigh of relief” at the First Republic deal, said Oanda’s Edward Moya, adding that “it is starting to look like a few major banking issues will not end up leading to a banking crisis”.
But Moya cautioned that the Fed policy decision on Wednesday could disappoint investors who are expecting interest rate increases to end after May.
The Fed “might hold off signaling they are ready to hold rates steady after one more hike,“ Moya said. “The Fed might choose to remain vigilant and that is something this market is not ready to price in.”
A reading by the Institute for Supply Management showed US manufacturing activity contracted for the fifth month in a row.
Recent earnings, however, provided some lingering optimism for investors, Ghriskey said. First-quarter results from S&P 500 companies have mostly beaten expectations, easing economic concerns.
“We’ve had good earnings relative to expectations. Analysts for now have backed off of lowering estimates,“ he said. “If we could have rates at this level ... and corporate America continue to deliver, it’s very positive.” – AFP, Reuters